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Off Peak

Fortnightly Magazine - July 1 1998

STARTING A NEW JOB CAN RESULT IN A FEW SURPRISES,but some new executives at electric utilities may be getting more than their share.

According to the Global Energy Utilities Practice, a Spencer Stuart study, electric utilities have been hiring droves of executives from outside industries (see Figure 1) to fill vice-presidential positions and above - only to lose their new recruits, often within a year.

By turning to other industries for new hires, utilities seek a shortcut on the road to competition, according to the study. In fact, many of these idealistic executives are attracted by the idea of pioneering restructuring of the electric industry. Nearly one-third of these newcomers hail from retail, a fourth come from financial institutions, and another fourth specialize in technology, telecommunications, or healthcare.

Most executives who participated in the study cite general disillusionment about the industry's culture as their primary motive for leaving. Nearly a third of the executives say they found resistance to change the most frustrating part of the job; another third cite the utilities' unfamiliarity with competitive markets. Others couldn't overcome the aversion to risk, poor customer service and a company-wide sense of entitlement to resources and benefits they encountered (see Figure 2). Newcomers' hopes of revolutionizing the industry are dashed by mass dedication to the status quo.

"The industries are trying to slow deregulation to a crawl," said one study participant. "They are talking about it a lot, but are not really doing anything." Another participant noted, "People advocating change are seen as renegades."

Forty-four percent of the executives weren't prepared for the differences in utility culture. "When I started, we didn't even call them customers," one participant said. "We called them 'ratepayers.'"

Most executives say they were hoping to find initiative, good communication skills, solid management in the face of uncertainty, flexibility, marketing skills, a customer-focus and knowledge of competitive market issues. They say these qualities are the most valuable for success.

This trend of losing new executives could leave electric utilities in a bind, according to the study. The culture shock is so pronounced that 18 percent of the executives contacted about the study had already abandoned their positions by its conclusion.

As the potential champions of deregulation bail out of the industry by the dozens, many cast a wary eye back to their former employers, wondering what will happen next. One lamented, "The executives at the senior table... will take companies down the tubes because of their inability to understand what a market condition is."


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